~ Market Research

Warren Buffett’s US$26.5-billion investment in this major railroad has turned into a cash machine

Days after Warren Buffett announced his US$26.5 billion buyout of railroad BNSF, he insisted that he’d paid a steep price to own a business that would benefit his company, Berkshire Hathaway Inc., over the next century.

“You don’t get bargains on things like that,” he said in a November 2009 interview with Charlie Rose that aired on PBS. “It’s not cheap.”

Five years later, that assessment rings a bit hollow. Buoyed by an onshore oil boom, BNSF has become a cash machine for Buffett. The railroad had sent more than US$15 billion in dividends to Berkshire through Sept. 30, according to quarterly regulatory filings, the latest of which was released last week. More stunning: The business is on pace to return all the cash Buffett spent taking it private by the end of this year.

Annual revenue at the railroad has risen 57%, and earnings more than doubled to US$3.8…